Japan plans separate tax treatment for crypto ETFs and derivatives

Dubai Increases Monitoring of Crypto License HoldersDubai is scrutinizing crypto license holders and license seekers more closely as a direct consequence of the collapse of Bahamas-based cryptocurrency exchange FTX, last year.On Wednesday Bloomberg cited people familiar with the matter who told it that Dubai’s Virtual Assets Regulatory Authority (VARA) has recently requested more information on the ownership structure, governance, and auditing procedures of applicants like global crypto exchange, Binance.©Pexels/Aleksandar PasaricCloser scrutinyAll international companies seeking permits are being asked for similar information. This stricter approach is a potential problem for Binance CEO Changpeng Zhao (CZ), who lives in Dubai and has made it a central point of expansion in the Middle East. The Emirate is attempting to balance fostering innovation with proper oversight of an industry that has been the subject of high-profile scandals in the past year.According to Sam Blatteis, CEO of The MENA Catalysts, which provides government-relations advice to fintech multinationals expanding in the Persian Gulf, “VARA wants to turn Dubai into a capital for the digital-assets economy while safeguarding its business ties with Western jurisdictions like Europe that are adopting more muscular crypto regulations.”CFTC lawsuitIn March, the US Commodity Futures Trading Commission sued Binance and CZ for allegedly violating derivatives regulations, claiming the firm had inadequate compliance procedures. Binance expressed disappointment with the lawsuit.The company claimed at the time that it had provided all necessary information to VARA regarding its ownership structure and external auditor, as well as answering any other queries on a proactive basis. VARA officials are also seeking information on the ownership, auditing, and board procedures at the global group level of Binance.Steering clear of FATFDue to its size and complexity, addressing these queries is taking longer. Binance’s complicated corporate structure includes several holding companies, three of which are named in the CFTC lawsuit, and multiple local entities. In February, a senior executive said Binance was attempting to hire an auditor for its entire balance sheet.Dubai is trying to get off the “gray list” of global money laundering and terrorist financing watchdog the Financial Action Task Force (FATF). To that end, it has cracked down on unlicensed over-the-counter (OTC) crypto exchanges, according to anonymous sources. Dubai belongs within the United Arab Emirates (UAE), with the foreign ministry of the UAE declining to provide any comment on the matter to Bloomberg. Komainu, Hex Trust, GC Exchange and Crypto.com are the four companies, in addition to Binance, that are licensed in the UAE, with the former three having only Preparatory Minimum Viable Product (PMVP) permits.Hex Trust said that providing additional information on ownership, auditing and board procedures didn’t prolong the application process for its Operational MVP license. Laurent Girouille, the head of Komainu’s regional office in Dubai, said the regulatory requirements were stringent. Meanwhile, Binance is awaiting the launch of Binance FZE, which is audited by Mazars and has a board of directors, while it upgrades to an Operational MVP license before applying for a Full Market Product permit.

Hong Kong and Israel Collaborate to Expand CBDC Access Beyond BanksIn a collaborative effort, the Hong Kong Monetary Authority (HKMA), the Bank of Israel (BoI), and the Bank of International Settlements (BIS) Innovation Hub have jointly released a comprehensive report on Project Sela, a central bank digital currency (CBDC) initiative.Photo by POURIA 🦋 on UnsplashBroadening the role of intermediariesThe report was published to the BIS website on Tuesday. In keeping with the trend of many CBDC projects, Project Sela is characterized by a robust public-private partnership. However, its particular focus lies in broadening the spectrum of intermediaries, aiming to offer retail CBDC services through a more diverse array of service providers, thereby reducing dependency on traditional banks and major payment providers.Andrew Abir, Deputy Governor of the Bank of Israel, emphasized the importance of fostering a dynamic and open ecosystem with a wide variety of service providers. He stated:“Competition and innovation require a flourishing and open ecosystem with many different types of service providers. This was our initial goal in Project Sela as a proof-of-concept, and the project proved the feasibility of the model we had in mind.”Involving retail banksIn a previous model explored through Hong Kong’s Project Aurum, retail banks were entrusted with customer-facing tasks while maintaining the central bank’s operation of the wholesale ledger for the eHKD. In contrast, Project Sela introduces a novel approach where the central bank operates the retail ledger — a model akin to Israel’s digital shekel.The primary actors in Project Sela, known as Access Enablers (AEs), notably do not have control over CBDC balances, distinguishing them from conventional payment providers. Moreover, AEs are not required to maintain liquidity to support CBDC services. Their role encompasses facilitating user onboarding and CBDC access, fulfilling know-your-customer (KYC) and compliance obligations, and routing payments. The role of banks and other “funding institutions” primarily revolves around enabling the conversion of cash and deposits into CBDC.The rationale behind this approach is rooted in the emergence of technological advancements in open banking and DeFi, which have demonstrated the potential to disentangle financial services by granting users greater access to their financial data and control over their own funds.Enabling participation among the unbankedProject Sela envisions the unbanked population utilizing ATMs to convert cash into CBDC. A similar approach has recently been taken by the Chinese authorities. In the resort city of Sanya, authorities have introduced e-CNY ATMs in order to enable e-CNY access for foreign tourists.However, it is noteworthy that in many countries, the primary function of ATMs is to dispense cash rather than accept it. Consequently, the inclusion of AEs could pose challenges to traditional banking institutions, as CBDC adoption could potentially impact bank deposits.Privacy and cybersecurity considerations are implicated within Project Sela. As the central bank operates the retail ledger, ensuring the confidentiality of personal information becomes imperative. To safeguard privacy, AEs employ a hashing mechanism to obfuscate personal identifiers, although the report does not delve into the subject in detail.While Bank of Israel Governor Amir Yaron admitted that a CBDC can never be anonymous, he claimed that “if we choose to issue a digital cash shekel, it will provide at least as much privacy as other digital means of payment.”

A regulatory divide regarding the digital asset sector is emerging across Asia. While China is moving to strengthen its prohibition on cryptocurrency operations to ensure financial stability, Central Asian states such as Kazakhstan and Turkmenistan are increasingly formalizing frameworks to integrate and regulate the industry.Photo by Road Ahead on UnsplashChina cites renewed crypto speculationAccording to Reuters, the People’s Bank of China (PBOC) has reaffirmed its prohibition on business activities involving digital assets, citing a renewed wave of speculation as a complication in managing financial risks. At a Nov. 28 meeting on crypto regulation, the central bank reiterated that commercial activity involving cryptocurrencies remains illegal. PBOC officials stated that enforcement against unlawful financial operations tied to cryptocurrencies would be intensified to safeguard economic stability. The central bank identified stablecoins as a primary concern, noting that they fail to meet customer identification standards and broader anti-money laundering (AML) requirements. Officials warned that these assets could create vulnerabilities to fraud, money laundering, and unregulated cross-border capital flows. Kazakhstan mulls $300M crypto moveIn contrast to Beijing’s elevated oversight, Kazakhstan is exploring the integration of digital assets into its financial reserves. According to BeInCrypto, National Bank Chairman Timur Suleimenov indicated on Nov. 28 that the monetary authority is considering an allocation of up to $300 million into crypto assets. However, he clarified that deploying the full amount is unlikely. Suleimenov explained that any potential investment would be drawn from the central bank’s gold and foreign-exchange reserves rather than the National Fund. He added that the National Bank of Kazakhstan intends to wait for market conditions to stabilize, citing recent volatility as a factor making the timing of such an investment uncertain. The latest development comes after Bloomberg Law reported last month that the country is preparing to launch a crypto reserve fund valued between $500 million and $1 billion as early as next year. This proposed fund is expected to target exchange-traded products and industry-related companies rather than direct crypto purchases, with capital potentially sourced from repatriated assets and mining proceeds. Simultaneously, the government is advancing physical infrastructure for the sector. In May, President Kassym-Jomart Tokayev unveiled plans for a "CryptoCity" pilot zone in the Alatau development north of Almaty. Under this government-approved sandbox program, authorities are testing blockchain-based tools for taxation, investment, and decentralized identity systems, with the aim of positioning Kazakhstan as a regional hub for innovation. Turkmenistan to launch licensing rulesFurther deepening the regional trend toward adoption, Turkmenistan has moved to establish a formal legal infrastructure for the sector.  Another Reuters report said the country recently passed legislation to legalize and regulate digital assets, which President Serdar Berdymukhamedov has signed into law. Scheduled to take effect on Jan. 1, the legislation creates a licensing regime for crypto exchanges and mining operations. A government spokesperson said the law spells out the legal and economic status of virtual assets, covering their creation, storage, circulation, and other functions, and aims to boost digitalization and draw foreign investment. Despite their differing approaches, the three countries reflect a shared recognition of digital assets’ growing relevance in global finance. China continues to view cryptocurrencies as a source of systemic risk, while Kazakhstan and Turkmenistan are testing whether regulation, licensing, and selective investment can deliver economic gains without compromising stability. Together, these diverging paths underscore a broader debate over whether engagement or exclusion offers a more resilient long-term model.